Don’t gamble on the future

Educate your kids on money matters

Afrom our mistakes and when it comes to money management skills, with most of us, there are plenty of examples of bad judgment we can teach our children not to replicate. But it takes more effort than asking them to do as we say, not as we do.

“Young adults are the fastest growing and largest category of bankruptcies in the United States,” notes Susan Molinari, national chairperson of Americans for Consumer Education and Competition (ACEC), an advocacy group fostering consumer education and financial literacy. “America’s savings rate remains in the low single digits. In fact, reforming bankruptcy law and the Social Security system have been top priorities of the president and congress this year and there is no hiding the reasons why.”

We are a country with a culture that sets trends and perennially looks forward. We are not a country that considers saving as a core value, and preparing for our later years isn’t sexy. Planning for expenses like college tuition, retirement and long-term care expenses is something far too many Americans are not doing.

Do Americans overall have the self-discipline to invest some of their earnings rather than have the current set percentage of them put into the Social Security Trust Fund, as is suggested by some of the federal legislation being considered in Social Security reform? Are medical savings accounts a practical solution that would help reduce the federal budget for health care? These ideas continue to be debated and regardless of what side an individual comes out on, a common thread through most of them is the issue of financial responsibility.

“It will take nothing short of a generational change to affect behavior related to financial management,” says Molinari. “Young people must be educated at an early age about how to become financially responsible adults.”

So when most teens are really interested in having the latest electronic gadget or making the loudest fashion statement, how do we expose them to the reality that if you take out a loan, you have to pay it back with interest?

It’s all about becoming aware of the truth we’ve heard a million times. Unfortunately, money does not grow on trees. Here are some suggestions that can help introduce your teen and maybe even you, to the virtues of sound money management. And make no mistake, by teaching your children these skills and employing them yourself, you are helping to shape a better future for our economy and our country.

 Develop a realistic budget and track your money. Nothing tells you more about yourself than how you spend your money. Just thinking about what it is you really need, rather than what you want, develops a new perspective. Even a teenager will admit her desires outweigh her needs.

 Determine that a reasonable percentage (10 percent or more) of your teen’s allowance or earnings from a job goes into savings. Savings can be used for a big ticket item that your teen wants — like a car — or as a contribution to their own college tuition.

 Budget for special occasions like vacations and Christmas presents. Sit down with your teen ahead of time and figure out the resources that can be allocated for these times. Spending for special occasions can easily throw you off your budget if not planned and put you into debt for months to come.

 Educate your children about our economy and how it works. You don’t have to have a degree in economics to open the world of financial options to your child. You will probably learn something yourself. Have discussions about how a checking account works, what causes the stock market to fluctuate, why gas prices change, the difference between renting, leasing and purchasing. Most of us are oblivious to these things until we have to know about them. But knowing about them affects the way we think and behave. “Being a responsible consumer is part of being a responsible citizen,” says Molinari. “Financial literacy is just as integral a part of your child’s education as math and reading. It prepares them